Tesla has faced 'insane' supply chain challenges © AaronP/Bauer-Griffin/Getty Images
Tesla has faced 'insane' supply chain challenges © AaronP/Bauer-Griffin/Getty Images

How has Tesla reacted to supply chain price pressure?

1 June 2021

Pressures in the raw materials supply chain have been blamed for consumers facing higher prices for Tesla vehicles. 

Tesla boss Elon Musk defended the move after the automaker was criticised on twitter for increasing prices.

In a tweet Musk said: “Prices increasing due to major supply chain price pressure industry-wide. Raw materials especially.”

In May, Electrek reported that Tesla had increased the prices of its Model 3 and Model Y, which it said was the fifth incremental price increase for the vehicles in a few months.

A month earlier, Musk told investors Tesla had faced “some of the most difficult supply chain challenges that we've ever experienced” in the first quarter of 2021.

In February, Tesla was forced to halt production at its assembly plant in California due to supply chain issues caused by backlogs at ports and severe snowstorms.

The auto industry has also been battling severe shortages of semiconductors, an issue that is expected to cost $110bn in revenue in 2021. 

Consulting firm AlixPartners said a number of factors had contributed to the shortage, including a fire at a facility belonging to chip supplier Renesas and weather-related issues in the automotive supply chain.

AlixPartners forecast that production of 3.9m vehicles would be lost this year as a result of the shortage.

Mark Wakefield, global co-leader of the automotive and industrial practice at AlixPartners, said: “The pandemic-induced chip crisis has been exacerbated by events that are normally just bumps in the road for the auto industry, such as a fire in a key chip-making fabrication plant, severe weather in Texas and a drought in Taiwan.

“But all these things are now major issues for the industry, which, in turn, has driven home the need to build supply-chain resiliency for the long term.”

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